06 Mar 2017

EU DAIRY RETURNS MORE RELEVANT THAN GDT – 33C/L REALISTIC BY MARCH

Commenting on the first ever GDT Annual Report, published today for 2016, IFA National Dairy Chairman Sean O’Leary noted that GDT traded only 636,000t of product during 2016 – down 36% on the peak levels of trade of 2014, and consisting mostly of WMP and SMP (73%, or 464,000t).

This is only a fraction of global exchanges in powder: less than 12% of the total quantities of milk powders traded globally during 2016, and just under half the 950,000 metric tonnes of SMP and WMP combined traded by the EU in that year (source: USDA).

“This must inform our analysis of the GDT auction. While it is an important international price discovery mechanism, and clearly influences buyers and sellers, it accounts for a small and decreasing portion of actual global trade, and is less important to us than EU exports and trade. It is, therefore, essential that co-ops would at all times put GDT in proper perspective, including this month when deciding on February milk prices,” Mr O’Leary said.

“EU commodity prices, as reported by the EU MMO for December, January and February have been stable to slightly easier, but as at the 26th February continue to return around 36.5c/l gross (before processing costs), equivalent to a milk price of 31.5c/l + VAT (33.2c/l including VAT),” he said.

“This compares with average January milk prices of around 29.6c/l + VAT (31.2c/l including VAT), and shows there is still scope for some price increases before peak. 33c/l for March milk remains very realistic,” he concluded.